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Monopsony Begets Monopoly, And Vice Versa

February 15, 2014 10:30 amFebruary 15, 2014 10:30 am

Nothing to see here, folks, says Comcast. The cable giant’s defenders insist that its already
awesome market power won’t be increased if it acquires Time Warner, because they serve (i.e., are local monopolists in) different geographical areas:

Scott Cleland, chairman of NetCompetition, an advocacy group that counts Comcast and other cable companies among its members, disagreed. He said that the argument for allowing cable company mergers was the same
that allowed for the consolidation of the Baby Bell companies after the breakup of AT&T. “It’s a geographic extension,” he said. “The companies serve geographically separate areas.
That’s what makes this merger different than the AT&T/T-Mobile merger. That was a competitor being eliminated. For residential and business broadband customers, this merger is not taking away a competitor.”

But elsewhere in the business section, we see clear evidence that this is nonsense. Comcast’s size gives it
monopsony as well as monopoly power — it is able to extract far more favorable deals from content providers than smaller rivals. And if it’s allowed to acquire Time Warner, it will be even more advantaged:

Still, should Comcast succeed in acquiring Time Warner Cable, it will use its enlarged scale to its advantage, potentially negotiating to pay lower fees to cable and broadcast networks.

This would, in turn, make it even harder for potential competitors to enter markets served by ComcastTimeWarner, strengthening its monopoly position.